To take or not to take? TFLS

Ciprico

I suppose you could put in a request to pull full tfls the day before the budget, that should be cancel-able the day of the budget if necessary as nothing would have happened in that time frame.


 Risky, but nothing to lose if you were reluctantly erring on taking it anyway...

MetaPhysical

I'm doing an half way house and taking 100k in TFC and I am in the middle of this now. I could have taken another 168k but chosen to edge my bets. These are the possibilities I have thought of:

1. She won't actually do it and this is all media speculation.  In my case, I need the 100k in any event and would be taking it irrespective and will get 80k stuffed into mine and my wife's ISA's straight away this and next tax years in the same funds.  Personally I don't think she will do it.  It would cause too many issues with public sector employees such as consultants, senior teachers, civil service, senior nurses etc.

2. She'll do it to people who have not touched their pots so far, the rationale being that people who have touched them then it's unfair to now restrict them because they are "using" their 268k allowance and have plans.  Because of this possibility I am taking some TFC now.  I could have waited until Springtime otherwise.

3.  She will reduce/abolish the allowance but it will start next tax year.

4. She'll do it (reduce/abolish) but from budget day onwards you will not be allowed to accrue any more TFC over 100k/a set figure.  Existing accrued TFC is ok.  This would be a nightmare to implement and administer.

5. She'll drop the allowance immediately for TFC withdrawals from budget day onwards.  I think this is exceedingly unlikely for the reasons mentioned above. However, the lunatics are in charge of the asylum with this government so anything is possible.

6. Some completely new mechanism announced.  Highly unlikely and even if it were it couldn't be applied immediately..

ukdw

MetaPhysical said:

I'm doing an half way house and taking 100k in TFC and I am in the middle of this now. I could have taken another 168k but chosen to edge my bets. These are the possibilities I have thought of:

1. She won't actually do it and this is all media speculation.  In my case, I need the 100k in any event and would be taking it irrespective and will get 80k stuffed into mine and my wife's ISA's straight away this and next tax years in the same funds.  Personally I don't think she will do it.  It would cause too many issues with public sector employees such as consultants, senior teachers, civil service, senior nurses etc.

2. She'll do it to people who have not touched their pots so far, the rationale being that people who have touched them then it's unfair to now restrict them because they are "using" their 268k allowance and have plans.  Because of this possibility I am taking some TFC now.  I could have waited until Springtime otherwise.

3.  She will reduce/abolish the allowance but it will start next tax year.

4. She'll do it (reduce/abolish) but from budget day onwards you will not be allowed to accrue any more TFC over 100k/a set figure.  Existing accrued TFC is ok.  This would be a nightmare to implement and administer.

5. She'll drop the allowance immediately for TFC withdrawals from budget day onwards.  I think this is exceedingly unlikely for the reasons mentioned above. However, the lunatics are in charge of the asylum with this government so anything is possible.

6. Some completely new mechanism announced.  Highly unlikely and even if it were it couldn't be applied immediately..

I am generally always in favour of hedging by taking a halfway approach - so if I thought PCLS limit might lower from £268 to £100k - I would I think take about £184k as a hedge.  (100+168/2)

If I thought it might go down to as low as £40k - then I think I would take about £154k.  (40+228/2)

I would then reinvest the PCLS back into the same funds - as much as possible in ISA, with the rest in GA accounts,  or alternatively I might keep a fair bit of the PCLS as high interest cash, and then up the risk factor on the 75%+  left in the pension to bring the whole risk level back where it was.

If I was the chancellor and wanted to maximise tax income I think I would lower the tax free limit to £100k or £40k immediately. But then for the rest of the £268k I would make it taxable at a lower rate for the first few years after taking the 0% PCLS of say 5-10%

I think just lowering the limit won't generate much extra tax, plus it would also mean less money in the economy - so less secondary tax - so maybe it would be best to leave it where it is or perhaps abolish UFPLS.

Cobbler_tone

MetaPhysical said:

However, the lunatics are in charge of the asylum with this government so anything is possible.

Wait for the next lot. Tax bands of £20k and £70k. 

£100k would be fine for me and help me frame my pensions accordingly.
Isn’t this what any change is about? Some are impacted, others aren’t, either not at all, or not until the future. Whether that is state pension age, benefits or taxation changes etc.
There will always be winners, losers or those not impacted either way.
You can guarantee that there are going to be changes in the upcoming budget leaving some worse off. Maybe not on pensions but it’s a certainty. You just have to make adjustments accordingly or take them on the chin. Certainly not worth getting wound up.

Liverpoolfc1967

I will be 18 months away from 60 in November at budget.  I have a good DB pension, linked avc and 2 dc pots.   I can take full £268,000 and have plans for the money ( house move, holidays etc).  I am thinking of crystallising and taking PCLS before budget.  Hit if they reduce cap to £100k is £70k net.  That is big.  I will lose circa 7.5% of db pension taking early.  However I can continue to add £60k per annum back into pension from earnings, so ensuring I mimimize higher rate tax.  

I will lose some growth on dc withdrawn , due to taxation,  but no where near £70k and I will invest in available tax free options, 
- isa s
- premium bonds and 
- short dated low value gilts

RogerPensionGuy

ukdw said:

MetaPhysical said:

I'm doing an half way house and taking 100k in TFC and I am in the middle of this now. I could have taken another 168k but chosen to edge my bets. These are the possibilities I have thought of:

1. She won't actually do it and this is all media speculation.  In my case, I need the 100k in any event and would be taking it irrespective and will get 80k stuffed into mine and my wife's ISA's straight away this and next tax years in the same funds.  Personally I don't think she will do it.  It would cause too many issues with public sector employees such as consultants, senior teachers, civil service, senior nurses etc.

2. She'll do it to people who have not touched their pots so far, the rationale being that people who have touched them then it's unfair to now restrict them because they are "using" their 268k allowance and have plans.  Because of this possibility I am taking some TFC now.  I could have waited until Springtime otherwise.

3.  She will reduce/abolish the allowance but it will start next tax year.

4. She'll do it (reduce/abolish) but from budget day onwards you will not be allowed to accrue any more TFC over 100k/a set figure.  Existing accrued TFC is ok.  This would be a nightmare to implement and administer.

5. She'll drop the allowance immediately for TFC withdrawals from budget day onwards.  I think this is exceedingly unlikely for the reasons mentioned above. However, the lunatics are in charge of the asylum with this government so anything is possible.

6. Some completely new mechanism announced.  Highly unlikely and even if it were it couldn't be applied immediately..

I am generally always in favour of hedging by taking a halfway approach - so if I thought PCLS limit might lower from £268 to £100k - I would I think take about £184k as a hedge.  (100+168/2)

If I thought it might go down to as low as £40k - then I think I would take about £154k.  (40+228/2)

I would then reinvest the PCLS back into the same funds - as much as possible in ISA, with the rest in GA accounts,  or alternatively I might keep a fair bit of the PCLS as high interest cash, and then up the risk factor on the 75%+  left in the pension to bring the whole risk level back where it was.

If I was the chancellor and wanted to maximise tax income I think I would lower the tax free limit to £100k or £40k immediately. But then for the rest of the £268k I would make it taxable at a lower rate for the first few years after taking the 0% PCLS of say 5-10%

I think just lowering the limit won't generate much extra tax, plus it would also mean less money in the economy - so less secondary tax - so maybe it would be best to leave it where it is or perhaps abolish UFPLS.

I also think they may indeed tinker with the PCLS TFLS and that 268K.

Maybe they will use a taper or time or anything else they can dream up to make pensions even more complicated. 

Reference these stories of HMRC and a possible 70% charge for people or organisations that move out cash and put it back inside whatever time limits, why are HMRC even pushing this story, it's pretty obvious because they tinkering and changing all the time, people have planned, then feel they need to be proactive because a lack of confidence. 

I do also wonder why the government has apparently confirmed the state pension tripple lock is now fully guaranteed in this parliament, why would they say this and then not comment on all the other potential pension changes possible. 

I'm 99% feeling the 268K will remain, but they may change sumthink and invent more various protections to be possibly helpful for some and less helpful for others. 

My yardstick is the system in part encouraged people to transfer out of DB schemes to use SIPP for planning and potential IHT work arounds and then pulled the plug on that from April 2027.